Do I Need To Specify Items To Be Covered in my Insurance Policy?

Protecting your home against the unexpected or the unthinkable involves purchasing separate insurance cover for the structure (homeowner’s insurance) and separate cover for the contents (household insurance). Contents refer to things in the house, the garage, and your storeroom. Outdoor pieces, like garden furniture, may be included subject to some conditions.

One fundamental thing to remember about household insurance is that the insurance company will assume that all household contents (all the things that would fall if you removed the roof from your house and turned it upside down) are included. Household insurance cannot be purchased only for particular things, e.g. a sound system. Because of this assumption, it is very likely that you will be underinsured.

This is why you need to specify items to be covered in the household insurance policy. This is the best way you can avoid that sticky situation.

Does being under-insured really cost much? Initially you may save on premiums, but if you do make a claim, the actual payment will be reduced corresponding to the extent of your being under-insured. If replacement value of your claim is R2 000 but the loss adjustor insists that you are under-insured by 30 percent, you’ll actually receive R1 400 and lose R600. Many times, the loss in settlement is significantly greater than the premium payments you save.

When you take the trouble to specify the items that constitute the possessions in your household, both you and the insurance company will know for certain what items are covered by the policy. Household insurance will cover only everyday things such as your furniture and kitchen appliances, clothing and other household equipment. You cannot include items that cost you a small fortune to purchase, such as jewellery or a Persian rug, in an ordinary household insurance policy; there are separate insurance policies that cover these luxury items.

With a detailed list that specifies items to be covered, it becomes easier for you to make an estimate of the value of each item. If you should lose these items, you want to be able to replace them with the proceeds of your insurance claim. But if you assign an erroneous value to the items covered, you will not receive the amount you expect and thus will be hard pressed to replace the items lost.

You will have to remember to record the current replacement value of the item, not its market value. There is a huge difference between replacement value and market value.

Insuring an article at market value means you will receive only the worth of the damaged or lost item on the market at the time you file a claim. That value may not be enough to provide an equal or equivalent replacement. Insuring the article at replacement value ensures that you will get the cost of an equal replacement or buy an equivalent. The odds are that replacement amount will be greater, so you will get full value. Your monthly premium will also be higher.

The rule of insuring your personal effects and other goods for the full replacement value should apply even to old appliances. Although you may think your refrigerator is a relic from antiquity and not worth much, it is still good policy to put replacement value. If it should lose it due to an insurable event, then you can get a good replacement for it.

When you specify items to be covered, you will want to include (in the All-Risks Section of the policy) those small, portable items that you carry with you all the time: your laptop, personal digital assistant, sunglasses, cameras, and others. Household insurance will cover such items only while they are inside your property, but once you bring them elsewhere, they are no longer covered unless you specify them in the policy.